ADDITIONAL INFORMATION 1. Income Exemption Threshold (IET) June 2019 Category A (no dependent) - Rs 305,000 Category B (one dependent) - Rs 420,000 Category C (two dependents) - Rs 480,000 Category D (three dependents) - Rs 525,000 Category E (four or more dependents) - Rs 555,000 2. Relief for Medical insurance premium or contribution (June 2019) A person may claim relief for premium or contribution payable for himself or his dependents in respect of whom Income Exemption Threshold has been claimed:- (a) on a medical or health insurance policy; or (b) to an approved provident fund which has its main object the provision for medical expenses. The relief is limited to the amount of premium or contribution payable for the income year up to a maximum of:- -Rs 15,000 for self -Rs 15,000 for first dependent -Rs 10,000 for second dependent -Rs 10,000 for third dependent No relief should be claimed where the premium or contribution is payable by the employer or under a combined medical and life insurance scheme. 3. Additional exemption in respect of dependent child pursuing undergraduate course (June 2019) Where a dependent under Category B, C, D, E or G is a child pursuing a non-sponsored fulltime undergraduate course at a recognised tertiary educational institution, the person shall, in addition to the income exemption threshold he is entitled to, be eligible to an additional exemption of (a) 135, 000 rupees or the amount of tuition fees paid up to a maximum of 175, 000 rupees in respect of each dependent studying in Mauritius at an institution recognised by the Tertiary Education Commission established under the Tertiary Education Commission Act; or (b) 200, 000 rupees in respect of each dependent pursuing undergraduate course outside Mauritius at a recognised institution. Page 3 of 10 No exemption for the above paragraph shall be allowed (a) where the annual tuition fees, excluding administration and student union fees, are less than 34,800 rupees for a child following an undergraduate course in Mauritius; (b) where the income referred to in section 27A (5) of the person, or the spouse of the person, as the case may be, exceeds 4 million rupees in an income year; or (c) in respect of the same dependent for more than 6 consecutive years. 4. ANNUAL ALLOWANCE SN Capital expenditure incurred on Rate of annual allowance (%) Base Value Cost 1 Commercial premises - 5% 2 Motor vehicles 25 - 3 Electronic and high precision machinery or equipment, computer hardware and peripherals and computer software 50 - 4 Furniture & Fittings 20 - 5 Other 35 - 5. FRINGE BENEFITS SN Fringe benefits Monthly taxable benefits (Rs) A Car Benefit Cylinder capacity of 1 up to 1600cc 9,500 2 1601 to 2000cc 10,750 3 above 2000cc 12,000 B Housing benefit Where property is - (a) owned by the employer 10 percent of employees total emoluments for unfurnished property. 15 percent of employees total emoluments for furnished property. (b) rented by the employer Actual rent paid C LOANS Interest free loans or loans at reduced rates Difference between the amount of interest for the month, calculated at 2 per cent per annum above the repo rate, prevailing at the end of that month, and the amount of interest paid in that month. D EXPENSES Domestic and private expenses borne by Employer, including utilities, wages of housemaids, school fees of children, club membership fee and any other domestic and private expenses Actual amount paid for the month For the purposes of item B (a), total emoluments shall exclude the yearly bonus and housing benefit. Page 4 of 10 6. DEDUCTION OF TAX AT SOURCE Amount or sum made available to the payee by way of - Rate of tax (%) 1 Interest payable by any person, other than by a bank or nonbank deposit taking institution, under the Banking Act, to any person, other than a company resident in Mauritius 15 2 Royalties payable to - (a) a resident 10 (b) a non-resident 15 3 Rent Resident 5 Non-resident 10 4 Payment to contractors and sub-contractors 0.75 5 Payment to providers of services as specified in the Fifth Schedule to the Income Tax Act 3 6 Payment made by Ministry, Government department, local authority, statutory body or the Rodrigues Regional Assembly on contracts, other than payments to contractors and subcontractors and payments to providers of services specified in the Fifth Schedule - (a) for the procurement of goods and services under a single contract, where the payment exceeds 300,000 rupees; 1 (b) for the procurement of goods under a contract, where the payment exceeds 100,000 rupees; or 1 (c) for the procurement of services under a contract, other than telephone, postal, air travel and hotel services, where the payment exceeds 30,000 rupees 3 7 Payment made to the owner of an immovable property or his agent pursuant to section 111B(g) 5 8 Payment made to a non-resident for any services rendered in Mauritius pursuant to section 111B(h) 10 9. Payment of management fees pursuant to 111B(i) to (a) a resident 10 (b) a non-resident 5 9. Payment of management fees pursuant to 111B(i) to (a) a resident 5 (b) a non-resident 10 10. Payments to a non-resident entertainer or sportsperson pursuant to 111B(j) 10 11. Commission 3

Mr Adil runs a garments factory and sells ready-made garments to local customers only. The following is the profit and loss statement of Mr Adil for the year ended 30 June 2019. Rs Rs Sales 3,854,700 Less Cost of sales (1,086,920) Gross Profit 2,767,780 Other income Dividends from MCB Ltd 300,000 3,067,780 Less Expenses Wages and salaries 642,000 Entertainment, gifts and donations 456,000 Stationery and Consumables 345,000 Legal and professional fees 176,500 Interest on loan 125,000 Electricity, water and telephone charges 185,400 Rent & Rates 272,585 Licences 28,000 Motor vehicle expenses 148,000 Repairs and maintenance 124,865 Depreciation 20,800 Provision for doubtful debts 19,580 Personal income tax of Mr Adil 4,570 Total Expenses (2,548,300) Net Profit 519,480 The following are additional information provided to you by Mr Adil: 1. Wages and salaries include the following: i) An amount of Rs 52,000 was paid to Mrs Premila, the baby-sitter of Mr Adils 4 year son. ii) Performance bonus to outstanding officers amounted to Rs 42,000. iii) Salary to his father, working as driver, amounted to Rs 198,000. The other driver of the business received Rs 150,000 as salary. Page 6 of 10 2. Entertainment, gifts and donations consist of the following: i) Donations to political parties Rs 96,000 ii) Gifts to customers Rs 126,000 iii) Entertainments to customers Rs 156,000 iv) Staff Welfare Party Rs 78,000 3. Legal and professional fees were as follows: i) Accountancy and audit fees Rs 25,000 ii) Consultancy fees in relation to new product development Rs 48,000 iii) Legal fees in relation to drafting of contract for employees Rs 46,000 iv) Notary fees in relation to purchase of residential house Rs 32,000 v) Penalty for late payment of taxes Rs 13,500 vi) Penalty for late submission of income tax returns Rs 12,000 4. The interest on loan related to a loan of Rs 750,000 contracted from a local commercial bank in January 2019. Mr Adil used the loan amount to purchase a residential land on which he is intending to construct a new house for himself. 5. Mr Adil currently lives in a one-storeyed building. The ground floor is being used as the factory. Electricity, water and telephone charges as well as Rent & Rates relate to the whole building. It has been ascertained that utility bills represent 60% for commercial use whereas rent and rates account for 20% for private purpose. 6. The motor vehicle expenses proportionately related to the expenses of three delivery vans and one private motor car for Mr Adil. The same proportion applied to the repairs and maintenance. 7. Repairs and maintenance consisted of the following: i) Redecorating administration offices Rs 24,865 ii) Purchase of new office equipment Rs 100,000 Page 7 of 10 8. A bad debt of Rs 36,000 was recovered during the financial year ended 30 June 2019. However, same has not been included in the reported turnover of the business. 9. Mr Adil took some garments from the factory for personal use. No records were kept for this transaction. The mark-up policy of the business is 20% and the cost of these goods amounted to Rs 80,000. 10.An amount of Rs 254,000 representing sales of garments was not included in the accounts of the business. 11.Annual allowances stood at Rs 18,800. REQUIRED (a) Calculate Adils tax adjusted trade profit for the year ended June 2019. [25 marks] (b) In the most efficient way, compute Adils income tax liability for the year ended June 2019, assuming that his wife is not working and not deriving any income. [5 marks] (c) Adil is intending to expand his business to international markets. Advise him the tax implications of his project in such a way that he minimises his tax liability [10 marks]

QUESTION 2 [30 MARKS] (a) Based on the residence and/or source rule, critically explain the tax implications of the following scenarios: (i) Maria is a wealthy Swiss national who intends to come and settle in Mauritius. She wants to know whether she will be assessable on money transferred from Switzerland. (ii) During the year ended 31 December 2019, Peter and Paul who are both retired Russian nationals have been granted residence permits by the Economic Development Board. Peter and Paul have spent 7 months and 4 months respectively in Mauritius during the year 2019. (iii) Chantal is a retired Swiss national who is living in Mauritius since 5 years. She sells her house in Switzerland and remits half of the sales proceeds to Mauritius. The remainder of her money is kept in a bank account in Switzerland. She regularly transfers money from her bank account to Mauritius in order to meet her living and personal expenses. (iv) George is US citizen and has worked for 3 months in a Mauritian firm. His salary is credited in his US bank account. (v) Armand is non-resident in Mauritius and owns a property in Mauritius. He derives monthly rent of Rs 40,000 which is credited in his overseas bank account. [15 marks] (b) Kavi derives annual employment from MCB and the following information is provided to you for the year ended 30 June 2019. (i) Kavi receives annual emoluments of Rs 2,760,000 exclusive of the end of year bonus. (ii) He enjoys the benefit of a company car of 2500cc used by him and the entire car running expenses are met fully by the employer. (iii) Kavi also owns a building which he rents out. His rental income amounts to Rs 800,000. Maintenance expenditure of the building amounts to Rs 350,000. (iv) During the year ended 30 June 2019, he received dividends from MCB Ltd of an amount of Rs 48,000. (v) Kavi joined a club in January 2019. This club has the reputation of having Page 9 of 10 as members very influent persons who would be potential customers to the firm where Kavi works. He avers that he joined this club purposely in order to attract potential customers. Indeed the firm noted an influx of customers after January 2019. Total Subscription expenses incurred by Kavi to the club are Rs 88,000. (vi) Very often, Kavi has to attend meetings at the offices of the clients. In so doing, he has to be well dressed. He usually attended these meetings in suits. He claimed that the expenditure incurred to acquire these suits is Rs 12,000. (vii) Kavis son, Akshay, aged 19 years, is following full time undergraduate education since June 2018 at Charles Telfair Institute. The tuition fees, excluding administration and student union fees, are Rs 63,800 for the year ended 30 June 2019. His wife is not working and not deriving any income. (viii) Kavi also contracted a housing loan for their first residence at Grand Bay. Interest paid for the year ended June 2019 was Rs 299,800. REQUIRED In the most efficient way, compute Kavis income tax liability for the year ended June 2019

QUESTION 3 [30 MARKS] (a) Explain the term Badges of Trade? Support your answer with relevant examples and tax cases. [20 marks] (b) Define business for income tax purposes and specify what income shall be considered as income from business? [10 marks]

QUESTION 4 [30 MARKS] Briefly explain the tax implications of the following terms: (a) Income received as directors fees from a company [6 marks] (b) Income received from the sale of an Immoveable property [6 marks] (c) The remittance basis [6 marks] (d) Expenditure incurred by a trader in the production of exempt income [6 marks] (e) Deductibility of travelling expenses in relation to employment income [6 marks]